Friday, July 25, 2014

Dave Johnson, bless his heart, thinks that there are Democrats who can be convinced that the real problem with the economy is the trade deficit. Whew! He is obviously right about the trade deficit being the real problem with the economy. He is probably not right about the Democrats agreeing with him.

The problem with the trade deficit is that it is structural. And the main drain is the fact that we must import so much energy to feed the lifestyle we have designed for ourselves. The census department calculates that petroleum products as a percentage of the deficit has run between 32% and 66% since 2006. Talk about structural! Something as obvious as urban sprawl means that petroleum consumption is designed and built into the social order. Worse, because we have not meaningfully addressed our oil consumption since this problem first became obvious in 1973, we have been forced to sell off the crown jewels of USA industrialization to pay the energy bills. This has meant that any realistic ability to increase our export industries has been severely crippled.

And so, Mr. Johnson, while I agree with virtually everything you write about the trade deficit, I must protest that without a meaningful reduction in petroleum imports, any talk about reducing the trade deficit is utterly meaningless.

The Democrat's Agenda Should Be: Fix The Trade Deficit

Dave Johnson | June 25, 2014

There is no way around it: There are three issues on people’s minds as we go into the midterm elections: jobs, jobs and jobs.

Since the 2008 financial crash – actually since Reagan was elected – most of the gains from our economy have gone to the 1 percent and many of the jobs have been shipped out of the country. And everyone knows it. What they don’t know is the direct relationship between the two. That relationship is the trade deficit.

The trade deficit is a direct measure of jobs leaving the country. The trade deficit is factories closing. The trade deficit is American dollars going to other countries so people there can spend them. The trade deficit is our standard of living leaking away. And the trade deficit is a major factor driving what remains of the budget deficit.

The trade deficit is our economy’s problem. Democrats need to get on board with that message. It doesn’t hurt that it’s also true.

Democrats Don’t Get That Republican Propaganda Works

Democrats in Washington are surrounded by D.C.’s daily events and don’t get it that the public doesn’t see what they think they see. They are immersed in the news and fighting daily battles and tend to think the public is informed and doing that, too. They tend to put reasons on things the public does that line up with what they experience in D.C.: “The reason voters in district 5 of the county special election in Colorado voted for Kranitz was because the sub-amendment to our section 5 jurisdictional funding retroparticle was blocked in committee on the third markup. Because it was on C-SPAN.”

But the public isn’t seeing it that way. The public is seeing “Democrats have been in charge” since 2008 and the economy is still bad. Period, end of story. (Not 2009, by the way; the election was in 2008 so they think the 2009 $1.4 trillion budget deficit was caused by Obama and the stimulus.)

Democrats Need A Simple And Clear Economic Agenda

If Democrats can’t come up with a counter to the Republican message that the economy is bad because Democrats are “in charge” and spend too much, they are going to lose badly. (P.S.: The answer is not to say “OK, so we’ll spend less.” That’s just feeds the lies and – as we have seen – just makes the economy even worse.)

Vinik explains that there are Democratic proposals that would really help fix the economy, but they are from “left-leaning economists” and “they have little political support.” One proposal is in a paper from (“left-leaning”?) Larry Summers, who argues that we have entered into “secular stagnation” and the “solution to secular stagnation is significant rounds of fiscal stimulus to fill the still-large hole in consumer demand for goods and services, known as aggregate demand.” In other words, more “stimulus” that Republicans will obstruct.

Another proposal is to fix the trade deficit:

A separate paper, from left-leaning economist Dean Baker, argues that the trade deficit is a significant impediment to full employment. U.S. imports exceeded exports by $500 billion in 2013—that is, $500 billion of American demand for goods and services supported jobs overseas. In response, Baker proposes lowering the value of the dollar and cracking down on currency manipulators like China who artificially lower the value of their currency so that their goods and services are cheaper, boosting exports. Yet, trade policy is not an exciting or accessible issue to most voters. A candidate could include it as part of their economic platform, but it cannot form the backbone of it.

Yet another proposal is a change in monetary policy to promote full employment. This brings up a political problem, according to Vinik. The public doesn’t understand monetary policy and has been propagandized to be against further stimulus. (The public thinks “government spending” causes unemployment.)

Vinik writes “Democrats will have to convince voters that much of the Obama agenda is still the right prescription for the economy, despite the weak results over the past five-plus years. That’s not easy.”

What Went Wrong: Filibusters And Austerity

President Obama and Democrats have made significant proposals that would have made a tremendous difference in the economy we experience today, but they also contributed to the mess we are in.

It’s a fact that Senate Republicans filibustered literally everything Democrats offered that might have helped the economy. That’s their strategy and it’s working: Block anything that could help the economy and blame Democrats because they were “in charge” while the economy continued to stagnate.

Here’s the thing: Democrats let them do it. They did not end the filibuster. For whatever reasons – tradition, attempting to remain “bipartisan” and “civil” against uncivil partisan opponents, whatever – the end result was they did not deliver for their constituents, the American people.

The other thing that Democrats let Republicans do to the country was austerity. In fact, most Democrats bought into it, went along with it, pushed it, reinforced it, messaged it and gladly fell into the Republican trap.

So, with an election coming, Democrats haven’t delivered for their constituents – the 99 percent – and the public is not happy with that.

The Problem Is The Trade Deficit, Not The Budget Deficit

Here is a path for Democrats: Talk about the trade deficit.

Our trade deficit is literally a measure of how many jobs we ship out of the country. And our trade deficit is huge. It is humongous. It is enormous. It is larger than any trade deficit in the history of the world, and it continues and continues and gets worse and worse.

The trade deficit is also a traditional Democratic issue. It is about jobs, blue-collar workers, jobs, factories, jobs, manufacturing, good wages and jobs. It is about seeing “Made in America” in stores again.

Everyone knows where the jobs went and continue to go: out of the country, mostly to China.

Everyone knows that the reason their pay is stagnant of falling is because people are afraid their job will be sent out of the country, too.

Everyone knows that something has been going on with these trade deals that let companies move out of the country to places where people and the environment are exploited and then bring the same goods back to the U.S. and sell them in the same stores for the same prices. OF COURSE that means jobs leave the country!

Ask almost anyone what they think of “NAFTA” – shorthand for all trade deals – and you will discover what is certainly one of the most salient, activating issues in politics today. Democrats, Republicans, Tea Party members, they all get it that jobs are being shipped out of the country (because they are), they all get it is making a few people really, really rich (because it is), and they all get that it is causing the rest of us to feel pain (because that is the result).

Economist tell us that the trade deficit represents “demand” that is leaving our country and is fueling jobs elsewhere. This means that people here are buying stuff – “demand” – but that the stuff they are buying is made somewhere else so we don’t get the benefit of those people all buying stuff. And the fact that there is a “deficit” means that the “somewhere else” is not reciprocating by buying stuff from us. They are not “trading” with us, they are selling to us but not buying from us. They are cheating and playing tricks to drain our country of those jobs and factories that would come back if they were buying the same amount from us as we are buying from them.

If Democrats want a simple jobs plan, this is it: Fix the trade deficit. Explain to people what balanced trade means and demand that trade be balanced. Come up with a clear plan to BALANCE trade and explain how this will bring back the jobs.

Do your part. Ask every candidate for Congress if they understand what the trade deficit is, how bad it is and what their plan is to fix it. more